Commodities Benefit from Megaforces

"I can see the comparison would have been inappropriate because these are not merely forces he is talking about, but megaforces, like some huge, murderous juggernaut viciously stomping across the economic landscape…"

by The Mogambo Guru

Martin Weiss of MoneyandMarkets.com says that the whole unfolding mess is turning into an inflection point in history. "We are witnessing," he says, "the greatest wealth shift of all time - from industry to mining and agriculture…from the traditional industrial power centers in the West to new power centers in the East and South…from paper assets to hard assets."

I think to myself that this is very interesting, but obviously too complicated for a low-IQ guy like me to, you know, grasp, even sober, if even then. Fortunately, I was saved from having to do any thinking as he boils it down to Four Forces, which I was going to contrast with the Four Noble Truths of the Buddha, but I can see the comparison would have been inappropriate because these are not merely forces he is talking about, but megaforces, like some huge, murderous juggernaut viciously stomping across the economic landscape and squashing things into puddles of mush under its huge feet, which is not entirely characteristic of the Buddha as I understand it.

Megaforce number one, he says, is that "The global population explosion is fueling a parallel explosion in the demand for resources", which is I say is bullish (B) for commodities, like gold.

Megaforce number two is that "global warming now threatens to destroy a larger portion of the world's crops with floods, droughts and other disasters", which I also say is also Very Bullish (VB) for commodities, like gold.

The third force, Megaforce number three, is that the "housing bust, mortgage meltdown, and credit crunch guarantee a U.S. recession", which is, I say, Very, Very Bullish (VVB) for commodities, like gold.

And while all of them are bad enough, strap on your crash helmet when he adds that Megaforce number four is, "massive money-pumping by the U.S. Federal Reserve", which means that there is a Megaforce number five, which is going to be "rising civil unrest in response to consumer prices that are rising like never before, and everybody is all pissed off that they don't have any money to get new golf clubs, and everybody is all grumpy all the time because I won't give them any money, like this lousy economy is all my fault or something, even though I have enough money to give them because I have been buying gold, silver and oil all along, but I am too stingy to part with any of it", and all of which is Very, Very, Very Bullish (VVVB) for commodities, like gold.

Puru Saxena of Purusaxena.com doesn't want to comment on my apparent fixation on gold, but actually hints at it by writing, "even if I tried, I could not possibly imagine a more bullish environment for all types of commodities (energy, metals, food and water). The classic ingredients of rising demand, tight supplies and monetary inflation have all come together at once."

But everybody wants to know, "What about gold? What will happen to gold in all of this economic mess caused by idiotic governments? Mogambo said we'd all be rich from owning gold!" Well, you apparently know what I would say, but you don't know what a liar I am, so let's turn, instead, to Junior Mogambo Ranger (JMR) Juan O., who lives in Venezuela, and who is very familiar with the macroeconomic idiocy of governments, and writes, "This has to be some type of record I think. Hugo Chavez had his inauguration as President on February 2, 1999. The price of gold in Venezuelan currency that day was Bs.144,275. Today, Halloween 2007, it costs Bs.5,244,322."

Normally, I would have discarded the email because it appears that further calculations are in order, and I was frantically hitting the "Delete" button to escape this math quiz. With a sigh of relief, I notice that he has already performed them! In fact, he calculates that gold has become, "more than 36 times more expensive" in eight lousy years!

And as an aside, he notes that the government of Venezuela is playing fast and loose with inflation statistics, just like everybody else, as "Things down here are pretty crazy when it comes to money matters, but I suppose it's a global trend to the power of n. For example I haven't found any milk for a few months, but according to government figures, it hasn't gone up in price for the last two years"! Hahaha! Government at its finest these days!

And that is why you should be buying gold right now, instead of reading my stupid Mogambo crap (SMC). And I should be, instead of writing it!

P.S. To get The Daily Reckoning sent directly to your inbox, sign up for our free email newsletter, or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.

The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications. Click here to visit the Mogambo archive page.

The Daily Reckoning is FREE!
Click below…

The Daily Reckoning is FREE! Click below…